B.O. is an economic ignoramus or a devious Marxist
By: Guest Authors
By Ben Cerruti
Recently B.O. said “Wall Street took unnecessary excessive risks and almost our entire economy into depression”. It is unfortunate that he knows so little about economics and the fact that what happened on Wall Street was the EFFECT rather than the CAUSE of the economic tsunami. In fact, if not ignorant he certainly is disingenuous since the Wall Street to which he is referring happens to be the entity that markets the debt issued by the Treasury. Firms like Goldman-Sachs are in essence an arm of the Treasury. The fox in the chicken coop.
In regard to the economic crisis that occurred on Wall Street, its CAUSE was initiated when the Fed placed an excessive amount of money into the economy to address the recession that started just prior to the GWB presidency and extended to ease the economic blow of 9/11. This inordinate amount of money deposited into our banking system had to be loaned out since that is how banks make money. The ability to easily sell the loans removed the liability of foreclosure and the result was the accelerated development of creative loans to meet the demand.
The increased demand caused home prices to increase markedly attracting speculators. The increased need for buyers of these loans was met by Wall Street’s investment bankers. They created bonds that were backed by a bundled package of a variety of mortgage types and initially priced by a complicated mathematical formula. Called Mortgage Backed Securities (MBS) they became considered as highly desirable investment vehicles and were sold worldwide.
Meanwhile, attempting to counteract what was occurring the Fed started to reduce the money supply. This increased the Federal Funds Rate multiple times but was unable to curb the excesses that had been created and the housing price bubble finally burst. The collapse of housing prices also resulted in the collapse of the market for MBS. Their value could no longer be adequately determined by the market or by the original pricing mechanism due to this complexity of this security. Thus Wall Street investment banking firms could no longer provide liquidity for these securities and faced imminent bankruptcy.
The Federal Government stepped in to adroitly bail the leading investment banking firm Goldman-Sacks (GS) out, not only by loaning them $Blillions but by bailing out AIG who owed them $20 Billion. Of course then Secretary of the Treasury Henry Paulson, who was a previous President of Goldman-Sachs, was not at all an influence in this happening. If you believe this I have a bridge to sell you.
You might also be interested in the fact that when Paulson became Treasury Secretary he was allowed to avoid Capital Gains Tax on some $200 Million worth of GS.stock he sold. By the way GS was also allowed to become a full fledge bank and thus to be able to borrow from the FED discount window at a rate of between 0 and 0.25%. Fractional reserve rules allowed them to loan up to 10 times this amount out at much higher interest rates. No wonder their earnings have gone through the roof.
B.O. knows that GS and their ilk are essential accomplices in the management of federal debt. It is unfortunate but true that the FED over many decades has aided and abetted the fiscal dalliances of the legislative and executive branches of our government by trying to micro-mange the money supply. This has allowed Wall Street firms like GS to become too necessary to fail. B.O. is now criticizing that in which he is a willing and contributing participant.
In my view, our President is either ignorant or disingenuous or both. In any event he appears to me to be a very good prevaricator. It stands to reason that our economic future cannot be based on false premises. It is obvious to me that B.O. believes like Karl Marx that “the end justifies the means”. He is on the road to Socialism/Marxism regardless of the economic consequences.
Now a senior citizen, Ben Cerruti has been involved in espousing his views in writing for the last 20 plus years. He has been published numerous times in various San Francisco bay area newspapers and has been actively involved in taking positions on ballot measures to the point of writing the arguments and rebuttals and appearing on television to state his position. He has had extensive correspondence with Milton Friedman, renowned economist and Nobel Laureate that provided him with intimate knowledge of the functions of the Federal Reserve System.
He carries with him a lifetime of experience in business, marketing, sales and finance. His background has included periods with his own manufacturer’s representative business, as well as, with the securities business as a registered representative and in the real estate business as a licensed broker. His education comprises gaining a BSEE degree at UC Berkeley, postgraduate study in business, economics, marketing and other studies including the operation of securities and commodities exchanges, economic factors affecting financial markets, business operations and financial statements.
Being literate in the html language of the Internet, he presently has developed two websites one of which is http://arationaladvocate.com dealing with socio-economic commentary. The other is http://adultcommunityresalehomes.com that is devoted exclusively to Brentwood California’s Summerset Active Adult Community for the benefit of all homeowners, realtors, lenders and potential buyers.
A lifetime conservative he is presently being published on several websites including his own.